External auditor issues unmodified opinion but flags repeated grant-management and procurement weaknesses

The Central Consolidated Schools Board of Education received the district's 2023'24 annual financial audit on Thursday, when external auditor Byron Manning presented the report and a summary of findings.

Manning said auditors issued an unmodified opinion on the district's financial statements — the highest routine audit opinion — but identified several repeated significant deficiencies and multiple compliance findings in grant administration, procurement and internal controls. "We did not identify any material weaknesses," Manning said, adding that the audit did note three significant deficiencies and a number of other matters that require board attention.

The audit shows the district's unrestricted net position is reported as a negative roughly $113 million, primarily because state accounting requires districts to show the estimated future pension and retiree health (ERB/OPEB) liabilities as if the district itself were fully liable. Manning described that number as "paper" in the sense that retirees receive those benefits through statewide systems rather than the district directly. He also highlighted a roughly $44 million positive change in net position driven by actuarial changes to pension and OPEB estimates, which likewise reflect accounting adjustments rather than immediate cash inflows.

Manning called attention to the operational (general) fund cash balance, which the audit records at about $7.7 million at year-end after factoring interfund receivables and accrued payroll liabilities. He also reported the district received about $60.8 million in federal awards during the audited year, which triggers the single-audit procedures that examine major federal programs.

Major audit findings and recurring issues called out in the report include: - Reimbursement and fund-balance tracking: auditors found multiple federal and state grant funds with positive or negative balances that did not reconcile to requests-for-reimbursement (RFRs) and recommended monthly tracking to ensure RFRs match fund balances. - Procurement and bid procedures: in at least one construction-related solicitation the winning vendor later reported a material omission (labor lines) that increased pricing; the district allowed the contractor to proceed rather than rebid, which the auditors classified as a procurement finding. - Impact Aid application and coding errors: auditors found student counts and expenditure inputs that were incorrect or keyed into the wrong columns, and said those errors reduced the district's reported counts and could affect funding. Manning said the application errors included both omitted students and an entry that should not have been coded as a student with a disability. - Unallowable charges to federal programs: auditors noted instances where expenditures were charged to federal programs that lacked adequate justification under the grant rules. - Purchase orders after-the-fact and budget control: the report listed instances of purchase orders dated after invoices and a small number of functions with expenditures over legally adopted budget amounts at the function level. - Travel reimbursements, outstanding stale checks and background checks: the audit includes several typical NMSA findings (travel per diem/actuals complexities, old outstanding checks, and one employee file missing the required FBI background check).

Manning told the board many findings are repeats from prior years, though he noted some improvement in the total number and in certain categories. He emphasized New Mexico's audit rules require auditors to report even small noncompliance items, which tends to produce many findings in districts that otherwise operate normally. "New Mexico has what they call 0 materiality level for certain requirements," Manning said, explaining why small procedural errors appear as findings.

Board members pressed for clarity on causes and remedies. Board member Montoya asked whether specific funds were involved in the unreimbursed items; Manning said a large portion related to a flow-through relationship with a charter where about $6,070 was not requested back from the state after reimbursing the charter. Board member Aspis and others asked about Impact Aid inputs and asked the administration to institute tighter review steps before filing the annual applications. Superintendent Carlson and finance staff said they plan to tighten month-end reconciliations, implement additional cross-checks on grant reimbursements and update internal review procedures for application data entry.

Manning concluded by walking the board through the audit's findings section and the district's required corrective-action responses, reminding trustees the report includes an auditor recommendation and a required responsible-official plan with timelines. "The responsible official's plan is the key part for a board member," Manning said, noting the board should watch administration follow through on the stated timelines.

The presentation prompted questions about how the accounting entries reflect grants and how to reduce repeated items; members asked administration to return with concrete remediation steps. Manning told trustees an unmodified opinion with no material weaknesses positions the district reasonably well, but urged that the board ensure the district's plan for correcting significant deficiencies is implemented and reported back to the board.

The board did not take a formal recorded vote on the audit at the time of presentation; Manning said the report is a public document the state auditor has accepted and that the board would formally approve the audit report in its regular procedure.

For now administration committed to monthly reconciliations of reimbursement funds, improved review of the Impact Aid application and revised procurement controls to reduce repeated findings.

The board directed staff to return with a written corrective-action schedule tied to responsible officers and due dates.